NSFAS Outsourcing Scandal: Controversial Practices Costing Taxpayers Up to R1 Billion

The Roots of the NSFAS Outsourcing Controversy in South African Higher Education

The National Student Financial Aid Scheme (NSFAS), established to provide financial support to eligible students from low-income families attending public universities and Technical and Vocational Education and Training (TVET) colleges in South Africa, has been at the center of a major scandal involving its outsourcing of student accommodation management. Introduced in 2023 as the 'student-centred accommodation model,' this initiative aimed to empower NSFAS-funded students—over 1 million in recent years—to directly select and book verified private accommodation near their institutions via an online portal. However, the model's reliance on private intermediaries has led to widespread criticism for governance lapses, inflated costs, and risks of corruption, potentially costing taxpayers up to R1 billion. 75 74

This approach bypassed traditional university housing systems, centralizing control under NSFAS while outsourcing key functions like property accreditation and payment processing to external companies. Public universities such as the University of Johannesburg (UJ), University of Pretoria (UP), and University of the Witwatersrand (Wits), along with TVET colleges like Majuba TVET College, have been directly impacted as students face housing instability, payment delays, and protests disrupting academic activities.

How the Outsourcing Model Works: A Step-by-Step Breakdown

The model operates through a multi-layered system. First, private accommodation providers register properties on NSFAS portals, paying per-bed fees (ranging from R100 to R200 depending on scale) split among accreditation agents (80%), NSFAS (15%), and portal providers (5%). Properties undergo accreditation by 39 outsourced agents who inspect for safety and capacity. Approved listings appear on portals where students book spaces. 75

• Registration: Landlords submit details; agents verify without rigorous checks in many cases.
• Accreditation: Agents assign grades (A-D); issues like a Richards Bay house listed as 200 beds highlight flaws.
• Booking and Payment: NSFAS deducts 5% 'licence fee' from rentals (80% to portals, 20% to NSFAS) before paying providers monthly.
• Off-take Agreements: Long-term leases (up to 20 years) for guaranteed occupancy, often undocumented.

Four portal providers—Xiquel Group, New Dawn Technologies, Training Young Minds (reinstated post-disqualification), and Profecia IT—were awarded 5-year contracts in 2023 despite evaluation recommending only two. 85 This structure, meant to ensure quality housing amid a shortage of 500,000 beds at universities, instead created a 'funding pipeline' vulnerable to abuse.

Timeline of the NSFAS Accommodation Outsourcing Rollout

The saga unfolded rapidly:

• 2022: Tender SCMN023/2021 for online solution; 20 bidders, including winners.
• 2023: Contracts signed; 39 accreditation agents appointed; model launched under CEO Andile Nongogo and chair Ernest Khosa. 72
• Oct 2023: Nongogo fired amid unrelated irregularities.
• Apr 2024: Khosa resigns over tender links.
• 2025: R230m withheld in 8 months; OUTA probe intensifies.
• Jan 2026: SIU recovers R1.7bn from unis/TVETs for old issues; Godongwana slams R700m admin costs. 86
• Mar 2026: OUTA report released; NSFAS phases direct payments.

Financial Toll: Breaking Down the R1 Billion Taxpayer Burden

OUTA estimates R600m-R1bn diverted over 5 years via fees: R180m-R200m annually to portals (80% of 5% deductions on billions in accommodation funding). In 2025 alone, R230m withheld from landlords; registration fees totaled R33m. Admin costs hit R700m yearly, enough for 9,000 students' fees, per Finance Minister Enoch Godongwana: "I don't see its value." 86 Providers like those near Majuba TVET report underpayments (R1,175 vs agreed R3,339 per student), exacerbating cashflow crises.OUTA's full report details these figures.

Photo by Chunjiang on Unsplash

Irregularities Uncovered: Inflated Beds and Ghost Students

OUTA flagged 10,000 suspicious beds among 250,000. Examples include Elandivect certifying a small Richards Bay house as 200 beds. Agents skipped inspections, enabling 'ghost students' claims. System failures by Xiquel led to revoked bookings post-occupancy, stranding students at TVETs and universities. 74 Procurement flaws: board overrode evaluators.

Stakeholder Perspectives: From Criticism to Calls for Reform

OUTA's Rudie Heyneke: "If agents certify without inspections, the entire system's reliability is questioned." 75

NSFAS CEO Waseem Carrim: Acknowledges challenges, cooperating with SIU, implementing direct payments phased through 2026, national accreditation audit.

Godongwana: Outsourcing everything questions NSFAS viability.

Universities South Africa (USAf): Welcomes SIU recoveries but urges stable funding to avoid disruptions.

Student unions decry instability; opposition demands accountability.

Disruptions at Universities and TVET Colleges

Payment delays sparked protests: University of Mpumalanga (UMP) suspended lectures as transport halted; Durban University of Technology (DUT) saw 5,000 affected; Cape Peninsula University of Technology (CPUT) faced evictions. SIU recovered millions from UFS (R438m), UP (R400m), Wits (R450m), Majuba TVET (R26m). Delays block registrations, historical debts strain unis. 72 105

Ongoing Investigations and Recoveries

SIU (Proclamation R88/2022) recovered R1.7bn from unallocated 2016-2021 funds held by unis/TVETs; probes continue into accommodation.SIU announcement. OUTA shared findings with Auditor-General, SIU.

Photo by Chunjiang on Unsplash

Path Forward: Reforms and Lessons for Higher Education

NSFAS: Direct payments to providers 2026, eliminating middlemen; upfront allowances disbursed (R3.6bn to unis Feb 2026). Recommendations: In-house systems, rigorous audits, university partnerships. Experts advocate hybrid models leveraging uni expertise. With 597% enrollment surge to 980k, stable funding critical for SA higher ed equity. 53 Constructive reforms could restore trust, ensuring taxpayer funds reach students effectively.